The 2 Entertainment Stocks With Over 35% Gains Still Have Room to Run – December 20, 2022

Most entertainment stocks gradually overcame the pandemic-induced uncertainties this year. The entertainment industry is riding a wave of tremendous opportunity owing to technological innovations, evolving generational behaviors and pandemic-led behavioral changes. While demand for entertainment content has been resilient during periods of economic uncertainty, the continued impacts of inflation might dampen their performances.

With the average U.S. household subscribing to almost five streaming services, it is clear that consumers have to stack these services to access the content they want. To support this trend, streamers have increased their investment in original programming and are passing these costs to the customers. Consequently, the average monthly subscription fees of stack services are approaching the cost of cable. Also, certain companies are focused on integrating gaming and live sports streaming to drive growth.

Although there is ongoing friction and fragmentation of streaming services and content, industry players are emphasizing on rationalization of marketing spend and optimization of content slate and distribution approach to deliver a steady state of high-impact releases. This paves a path for efficiency in customer engagement as well as drive subscriber acquisition.

We believe that emphasis on unit economics by aggregating the best sports and entertainment content, customer engagement (to drive advertising sales) and offerings of additional content and features (without overshooting costs) are likely to act as key catalysts for growth in the upcoming periods.

2 Top Stocks to Watch

Although economic uncertainty prevails due to inflationary pressures, it would be appropriate for investors to focus on these fundamentally-sound stocks. Investors can keep an eye on the following entertainment stocks that have performed well and are expected to continue the winning streak in the upcoming year.

We have shortlisted two entertainment stocks with the help of the Zacks Stock Screener, carrying a Zacks Rank #2 (Buy) and gaining more than 35% so far this year. These stocks have outperformed their respective industries and the broader Leisure sector so far this year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Manchester United plc (MANU Free Report) has shown strong momentum in commercial operations, reflecting both the welcome return of match-going fans to the stadium after the pandemic and the strength of its venue, merchandising and partnership operations. Despite global economic headwinds, the company remains optimistic on account of global TV rights for the Premier League and UEFA competitions.

Also, a competitive sponsorship market with many new market entrants looking to build and strengthen their brand through associations acts as a tailwind. In terms of digital activity, the company continues to witness growth in the global reach of the club media content across owned and operated channels and all the major social media platforms. The company expects continued growth backed by its fan engagement initiatives, infrastructure upgrades and maintenance projects.

Zacks Investment Research
Image Source: Zacks Investment Research

Manchester United currently carries a Zacks Rank #2 and has gained 49.4% so far this year. For fiscal 2023, the loss estimates have improved 30.8% in the past 60 days, narrowing from a loss of 52 cents per share to a loss of 36 cents.

Bowlero Corp. (BOWL Free Report) is poised to benefit from pent-up demand, algorithmically powered management system (QMS), center acquisitions and cost control discipline. Since the start of fiscal 2022, the company has added 38 new centers to its portfolio, reflecting a growth of approximately 10% annually. Also, it reported solid performance with respect to the same.

Meanwhile, the company emphasized on the initiation of a pilot of a skill-based gamification app – Money Ball. The initiative focuses on the performance of its centers by deepening engagement with its guests courtesy of bowl and challenges for cash or other prizes depending on the location. Money Ball uses proprietary algorithms to determine odds on certain challenges, ranging in difficulty from as easy as breaking 100 to as difficult as bowling and exact score. The company remains optimistic in this regard and anticipates the initiative to drive visitor frequency in centers and enhance the guest experience. Also, vis-à-vis event and league support the company’s top-line growth through the fiscal year 2023.

Zacks Investment Research
Image Source: Zacks Investment Research

Bowlero currently carries a Zacks Rank #2 and has gained 38.8% this year. For fiscal 2023, Bowlero’s earnings estimates have increased 1.9% in the past 60 days to 54 cents per share.  The consensus mark for sales reflect growth of 11.5% on a year-over-year basis.

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